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Original Team Tries to Revive Starbucks

SEATTLE — Since Howard D. Schultz returned to the helm of Starbucks in January, he has desperately tried to recapture the company’s original magic.

The nostalgia-flavored turnaround effort has included a new coffee blend that harks back to the company’s Seattle origins and smaller espresso machines that do not isolate employees from customers.

With less fanfare, Mr. Schultz has also hired back one of the authors of Starbucks’s original success: Arthur Rubinfeld, its president of global development. Back at Starbucks since February, Mr. Rubinfeld is now guiding a renovation of its stores and refocusing on the urban markets that gave the company its illustrious start.

Starbucks is to some extent real estate driven, a business that depends on selecting visible, convenient locations. That makes Mr. Rubinfeld, a 54-year-old architect, one of Starbucks’s most important stewards.

He led the company’s real estate and design division throughout the ’90s, fashioning an expansion strategy that focused on traffic patterns and demographics and became a model for the rest of the retail world. Mr. Rubinfeld left Starbucks in 2002 to start his own consulting firm.

Last December, while plotting his return as chief executive, Mr. Schultz met Mr. Rubinfeld at — where else? — a Starbucks, in Seattle’s affluent Madison Park neighborhood, and asked him to resume his old duties.

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After Howard Schultz, left, reclaimed the job of chief executive of Starbucks, he rehired Arthur Rubinfeld to help restore the company to its former success, which they had helped to create.Credit
Lee Celano for The New York Times

“I was concerned and a little upset at where our legacy could have ended up,” Mr. Rubinfeld said, describing his decision to accept the offer. “Everything about the company was being defined by others.”

Nearly a year later, that has not changed, and the company is increasingly seen as a fading symbol of an overexuberant age. Wall Street analysts and investors continue to disparage Starbucks, citing self-inflicted wounds like overexpansion and mediocre food.

The company’s fortunes seem to be waning by the day. It is being squeezed by rivals like McDonald’s and Dunkin’ Donuts, which have started offering lower-price espresso drinks, and by a faltering economy that is forcing consumers to reconsider their $3.65-a-day caramel macchiato kick.

As a result, Starbucks stock has dropped more than half in the last year and hit a nearly seven-year intraday low this week before rebounding slightly. It closed Wednesday at $11.33, compared with above $26 a year ago.

In an interview last week, Mr. Schultz said the number of customers in Starbucks stores had declined compared with last year but that the trend appeared to have bottomed out. He argued that the company was in a better position than most to navigate a recession, largely because it has already decided to close 600 stores in the United States and lay off 1,000 workers this year.

“We believe we are more relevant to our customers than ever before because of what we are all facing,” Mr. Schultz said, arguing that his cafes can be a refuge from the economic storm. “We are not selling a commodity cup of coffee. We have created a unique experience.”

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In an effort to revive Starbucks, Mr. Rubinfeld says, he will focus on adding stores to urban areas, to attract affluent young professionals, and begin to tailor new stores to specific neighborhoods.Credit
Rob Bennett for The New York Times

Mr. Schultz met Mr. Rubinfeld 30 years ago when they were both bachelors and neighbors in the same East Village apartment building. Today, the two remain so friendly that they close personal e-mail messages to each other with the word “love.”

Mr. Rubinfeld’s touchy-feely camaraderie and unwavering smile mask his exasperation over Starbucks’s recent setbacks. In particular, he feels that the company has been treated unfairly by the news media and critics who disparage its coffee and accuse it of environmentally incautious practices like wasting water. (Starbucks prides itself on its progressive policies. It said Wednesday that it was doubling its purchase of farmer-friendly “Fair Trade” coffee and donating to Bono’s RED philanthropy.)

But Mr. Rubinfeld acknowledges that in its relentless expansion to around 17,000 stores, Starbucks overlooked the costs to its reputation of generic, cookie-cutter designs and of placing stores in dreary suburban strip malls.

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“We did not have the discipline to say no,” he said. “The issue was our failure to say, ‘That store in that location should not be opened.’ ”

Now that he is again leading Starbucks’s real estate team, Mr. Rubinfeld says he will focus on adding stores to urban areas — where there is already a near-saturation of the coffee market, but also a preponderance of affluent young professionals who subsist on fancy coffee drinks.

Mr. Rubinfeld said Starbucks would begin to tailor new stores to specific neighborhoods. For example, it could create some stores in upscale neighborhoods that drop frilly drinks like Frappuccinos and sell only coffee beans and high-end espresso drinks — similar to Starbucks’s original store at Seattle’s Pike Place Market. That would serve to “reinforce our brand’s position as a purveyor of high quality coffees of the world,” he said.

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Don Ryan/Associated Press

Underlying all new store openings will be a strict commitment to sales targets. “I will look into the eyes of senior managers and they will be directly accountable,” Mr. Rubinfeld said. “That person has to know a new store will hit its first-year sales goals.”

He also wants to change the inside of Starbucks stores. Last week he unveiled a new design to the company’s regional managers. Elements of it, like energy-efficient lighting, new furniture using reclaimed materials and modular merchandising racks to display the growing array of Starbucks products, will begin appearing in stores across the country later this year. So will new paintings that evoke the company’s coffee heritage — as opposed to what Mr. Rubinfeld calls the generic “Pier 1 art” dotting some store walls now.

Early next year, some cafes, beginning in Seattle, will receive a more thorough overhaul, with longer bars that have more room for cashier terminals — for shorter lines — and community tables that might force patrons to take a break from their laptops and talk to one another.

“The more people are in front of computers and technologies all day, the more they long for human interaction,” Mr. Rubinfeld said.

Naturally, some Wall Street analysts are skeptical that new décor and a smarter real estate strategy can help Starbucks overcome its most pressing problems.

“I don’t think people aren’t going there because they don’t like the way a store looks,” said Nicole Miller Regan, an analyst at Piper Jaffray. “I think they get turned off by price and by waiting in lines that keep getting disrupted by a food order.”

But Mr. Schultz and Mr. Rubinfeld say the path out of Starbucks’s mess leads back to its past — re-establishing the company as a responsible social citizen and its stores as a pleasant place for (real and aspiring) young professionals to relax.

“When we have been doing our best work, it has been because people have seen Starbucks for more than a cup of coffee,” Mr. Schultz said.

A version of this article appears in print on , on Page B3 of the New York edition with the headline: Original Team Tries To Revive Starbucks. Order Reprints|Today's Paper|Subscribe